Introduction

Canada's publicly funded health care system is dynamic--reforms have been made over the past four decades and will continue in response to changes within medicine and throughout society. The basics, however, remain the same--universal coverage for medically necessary health care services provided on the basis of need, rather than the ability to pay.

Background

The basic values of fairness and equity that are demonstrated by the willingness of Canadians to share resources and responsibility are displayed in Canada's health care system, and have been reflected in the modifications and major reforms made to the system since its inception. The system has been and continues to be modified as the country's population and circumstances change, and as the nature of health care itself evolves.

Evolution of Our Health Care System

In general, Canada's Constitution sets out the powers of the federal and the provincial and territorial governments. Under the Constitution Act, 1867, the provinces were responsible for establishing, maintaining and managing hospitals, asylums, charities and charitable institutions, and the federal government was given jurisdiction over marine hospitals and quarantine. The federal government was also given powers to tax and borrow, and to spend such money as long as this did not infringe on provincial powers. The federal department of Agriculture covered federal health responsibilities from 1867 until 1919, when the department of Health was created. Over the years the responsibilities of both levels of government have changed.

Before World War II, health care in Canada was, for the most part, privately delivered and funded. In 1947, the government of Saskatchewan introduced a province-wide, universal hospital care plan. By 1950, both British Columbia and Alberta had similar plans. The federal government passed the Hospital Insurance and Diagnostic Services Act in 1957, which offered to reimburse, or cost share, one-half of provincial and territorial costs for specified hospital and diagnostic services. This Act provided for publicly administered universal coverage for a specific set of services under uniform terms and conditions. Four years later, all the provinces and territories had agreed to provide publicly funded inpatient hospital and diagnostic services.

Saskatchewan introduced a universal, provincial medical insurance plan to provide doctors' services to all its residents in 1962. The federal government passed the Medical Care Act in 1966, which offered to reimburse, or cost share, one-half of provincial and territorial costs for medical services provided by a doctor outside hospitals. Within six years, all the provinces and territories had universal physician services insurance plans.

From 1957 to 1977, the federal government's financial contribution in support of health care was determined as a percentage (one-half) of provincial and territorial expenditure on insured hospital and physician services. In 1977, under the Federal-Provincial Fiscal Arrangements and Established Programs Financing Act, cost sharing was replaced with a block fund, in this case, a combination of cash payments and tax points. A block fund is a sum of money provided from one level of government to another for a specific purpose. With a transfer of tax points, the federal government reduces its tax rates and provincial and territorial governments simultaneously raise their tax rates by an equivalent amount. This new funding arrangement meant that the provincial and territorial governments had the flexibility to invest health care funding according to their needs and priorities. Federal transfers for post-secondary education were also added to the health transfer.

In 1984, federal legislation, the Canada Health Act, was passed. This legislation replaced the federal hospital and medical insurance acts, and consolidated their principles by establishing criteria on portability, accessibility, universality, comprehensiveness, and public administration. The Act also added provisions that prohibited extra billing and user fees for insured services (see this brochure's section on the federal government for further details).

Federal legislation passed in 1995 consolidated federal cash and tax transfers in support of health care and post-secondary education with federal transfers in support of social services and social assistance into a single block funding mechanism, the Canada Health and Social Transfer (CHST), beginning in fiscal year 1996-1997.

An agreement on health reached in 2000 by the federal, provincial and territorial government leaders (or first ministers) set out key reforms in primary health care, pharmaceuticals management, health information and communications technology, and health equipment and infrastructure. At the same time, the federal government increased cash transfers in support of health.

In 2003, the first ministers agreed on the Accord on Health Care Renewal, which provided for structural change to the health care system to support access, quality and long-term sustainability. The Accord committed governments to work toward targeted reforms in areas such as accelerated primary health care renewal; supporting information technology (e.g., electronic health records, telehealth); coverage for certain home care services and drugs; enhanced access to diagnostic and medical equipment; and better accountability from governments.

Under the Accord, federal government cash transfers in support of health care were increased, and the CHST was split into the Canada Health Transfer for health and the Canada Social Transfer for post-secondary education, social services and social assistance, effective April 2004.

Further reforms were announced by first ministers in A 10-Year Plan to Strengthen Health Care in 2004. The federal, provincial and territorial governments committed to a health care renewal plan that included work toward reforms in key areas such as: wait times management; health human resources; Aboriginal health; home care; primary health care; a national pharmaceutical strategy; health care services in the North; medical equipment; prevention, promotion and public health; and enhanced reporting on progress made on these reforms. To support the Plan, the federal government increased health care cash transfers including annual increases to the Canada Health Transfer from 2006-07 until 2013-14 to provide predictable growth in federal funding.

In spring 2007, all provinces and territories publicly committed to establishing a Patient Wait Times Guarantee in one priority clinical area by 2010 and to undertaking pilot projects to test guarantees and inform their implementation. A Patient Wait Times Guarantee is the offer of alternative care options (e.g., referral to another physician or health care facility) to patients whose wait times exceed a defined timeframe when medically necessary health services should be provided.

For more detail on the history of our health care system, refer to the resources at the end of this brochure: the Timeline, Additional Reference Sources and On-Line Resources.

The Role of Government

The organization of Canada's health care system is largely determined by the Canadian Constitution, in which roles and responsibilities are divided between the federal, and provincial and territorial governments. The provincial and territorial governments have most of the responsibility for delivering health and other social services. The federal government is also responsible for some delivery of services for certain groups of people.

Publicly funded health care is financed with general revenue raised through federal, provincial and territorial taxation, such as personal and corporate taxes, sales taxes, payroll levies and other revenue. Provinces may also charge a health premium on their residents to help pay for publicly funded health care services, but non-payment of a premium must not limit access to medically necessary health services.

There is more to health than the health care system. The responsibility for public health, which includes sanitation, infectious diseases and related education, is shared between the three orders of government: federal, provincial/territorial and local or municipal. However, these services are generally delivered at the provincial/territorial and local levels.

The federal government

The federal government's roles in health care include setting and administering national principles for the system under the Canada Health Act; financial support to the provinces and territories; and several other functions, including funding and/or delivery of primary and supplementary services to certain groups of people. These groups include: First Nations people living on reserves; Inuit; serving members of the Canadian Forces; eligible veterans; inmates in federal penitentiaries; and some groups of refugee claimants.

The Canada Health Act establishes criteria and conditions for health insurance plans that must be met by provinces and territories in order for them to receive full federal cash transfers in support of health. Provinces and territories are required to provide reasonable access to medically necessary hospital and doctors' services. The Act also discourages extra-billing and user fees. Extra-billing is the billing of an insured health service by a medical practitioner in an amount greater than the amount paid or to be paid for that service by the provincial or territorial health insurance plan. A user charge is any charge for an insured health service other than extra-billing that is permitted by a provincial or territorial health insurance plan and is not payable by the plan.

The federal government provides cash and tax transfers to the provinces and territories in support of health through the Canada Health Transfer. To support the costs of publicly funded services, including health care, the federal government also provides Equalization payments to less prosperous provinces and territorial financing to the territories.

Direct federal delivery of services to First Nations people and Inuit includes primary care and emergency services on remote and isolated reserves where no provincial or territorial services are readily available; community-based health programs both on reserves and in Inuit communities; and a non-insured health benefits program (drug, dental and ancillary health services) for First Nations people and Inuit no matter where they live in Canada. In general, these services are provided at nursing stations, health centres, in-patient treatment centres, and through community health promotion programs. Increasingly, both orders of government and Aboriginal organizations are working together to integrate the delivery of these services with the provincial and territorial systems.

The federal government is also responsible for health protection and regulation (e.g., regulation of pharmaceuticals, food and medical devices), consumer safety, and disease surveillance and prevention. It also provides support for health promotion and health research. In addition, the federal government has instituted health-related tax measures, including tax credits for medical expenses, disability, caregivers and infirm dependants; tax rebates to public institutions for health services; and deductions for private health insurance premiums for the self-employed.

The five Canada Health Act principles provide for:

Public Administration: The provincial and territorial plans must be administered and operated on a non profit basis by a public authority accountable to the provincial or territorial government.

Comprehensiveness: The provincial and territorial plans must insure all medically necessary services provided by hospitals, medical practitioners and dentists working within a hospital setting.

Universality: The provincial and territorial plans must entitle all insured persons to health insurance coverage on uniform terms and conditions.

Accessibility: The provincial and territorial plans must provide all insured persons reasonable access to medically necessary hospital and physician services without financial or other barriers.

Portability: The provincial and territorial plans must cover all insured persons when they move to another province or territory within Canada and when they travel abroad. The provinces and territories have some limits on coverage for services provided outside Canada, and may require prior approval for non-emergency services delivered outside their jurisdiction.

The provincial and territorial governments

The provinces and territories administer and deliver most of Canada's health care services, with all provincial and territorial health insurance plans expected to meet national principles set out under the Canada Health Act. Each provincial and territorial health insurance plan covers medically necessary hospital and doctors' services that are provided on a pre-paid basis, without direct charges at the point of service. The provincial and territorial governments fund these services with assistance from federal cash and tax transfers.

Medically necessary services are not defined in the Canada Health Act. It is up to the provincial and territorial health insurance plans, in consultation with their respective physician colleges or groups, to determine which services are medically necessary for health insurance purposes. If it is determined that a service is medically necessary, the full cost of the service must be covered by the public health insurance plan to be in compliance with the Act. If a service is not considered to be medically required, the province or territory need not cover it through its health insurance plan.

The roles of the provincial and territorial governments in health care include:

administration of their health insurance plans;

planning and funding of care in hospitals and other health facilities;

services provided by doctors and other health professionals;

planning and implementation of health promotion and public health initiatives; and

negotiation of fee schedules with health professionals.

Most provincial and territorial governments offer and fund supplementary benefits for certain groups (e.g., low-income residents and seniors), such as drugs prescribed outside hospitals, ambulance costs, and hearing, vision and dental care, that are not covered under the Canada Health Act.

Although the provinces and territories provide these additional benefits for certain groups of people, supplementary health services are largely financed privately. Individuals and families who do not qualify for publicly funded coverage may pay these costs directly (out-of-pocket), be covered under an employment-based group insurance plan or buy private insurance. Under most provincial and territorial laws, private insurers are restricted from offering coverage that duplicates that of the publicly funded plans, but they can compete in the supplementary coverage market.

As well, each province and territory has an independent workers' compensation agency, funded by employers, which funds services for workers who are injured on the job.

Health Expenditures

Within the publicly funded health care system, health expenditures vary across the provinces and territories. This is, in part, due to differences in the services that each province and territory covers and on demographic factors, such as a population's age. Other factors, such as areas where there are small and/or dispersed populations, may also have an impact on health care costs.

According to the Canadian Institute for Health Information (CIHI), in 1975, total Canadian health care costs consumed 7% of the Gross Domestic Product (GDP). Canada's total health care expenditures as a percentage of GDP grew to an estimated 11.7% in 2010 (or $5,614 CDN per person).Footnote 1 In 2010, publicly funded health expenditures accounted for seven out of every 10 dollars spent on health care. The remaining three out of every 10 dollars came from private sources and covered the costs of supplementary services such as drugs, dental care and vision care.Footnote 2

Total Health Expenditures by Source of Finance, 1975

Note: Although the graph notes that provincial/territorial governments pay for 71% of health expenditures in Canada, the federal government supports provincial/territorial expenditures through fiscal transfers.

Note: Although the graph notes that provincial/territorial governments pay for 65% of health expenditures in Canada, the federal government supports provincial/territorial expenditures through fiscal transfers.

How health care dollars are spent has changed significantly over the last three decades. On average, the share of total health expenditures paid to hospitals and physicians has declined, while spending on drugs has greatly increased.

Though the share of health care expenditures accounted for by hospitals declined to 29% in 2010 from approximately 45% in the mid-1970s, hospitals continue to account for the largest share of health care spending. Spending on drugs has accounted for the second-largest share since 1997, making up 16% of spending in 2010. The third-largest share of health care expenditures is accounted for by spending on physicians, which made up 14% of spending in 2010.Footnote 3

How Health Care Services Are Delivered

Canada's publicly funded health care system is best described as an interlocking set of ten provincial and three territorial health systems. Known to Canadians as "medicare," the system provides access to a broad range of health services.

What Happens First (Primary Health Care Services)

When Canadians need health care, they most often turn to primary health care services, which are the first point of contact with the health care system. In general, primary health care serves a dual function. First, it provides direct provision of first-contact health care services. Second, it coordinates patients' health care services to ensure continuity of care and ease of movement across the health care system when more specialized services are needed (e.g., from specialists or in hospitals).

Primary health care services are increasingly comprehensive, and may include prevention and treatment of common diseases and injuries; basic emergency services; referrals to and coordination with other levels of care, such as hospital and specialist care; primary mental health care; palliative and end-of-life care; health promotion; healthy child development; primary maternity care; and rehabilitation services.

Doctors in private practice are generally paid through fee-for-service schedules that itemize each service and pay a fee to the doctor for each service rendered. These are negotiated between each provincial and territorial government and the medical professions in their respective jurisdictions. Those in other practice settings, such as clinics, community health centres and group practices, are more likely to be paid through an alternative payment scheme, such as salaries or a blended payment (e.g., fee-for-service payments plus incentives for providing certain services such as the enhanced management of chronic diseases). Nurses and other health professionals are generally paid salaries that are negotiated between their unions and their employers.

When necessary, patients who require further diagnosis or treatment are referred to other health care services, such as diagnostic testing, and health care professionals, such as physician specialists, nurse practitioners, and allied health professionals (health care professionals other than physicians and nurses).

Health Human Resources

In 2006, just over 1,000,000 people in Canada worked directly in health occupations; this represented 6% of the total Canadian workforceFootnote *.

Health care providers may be regulated (through professional colleges or other bodies) or non-regulated, unionized or non-unionized, employed, self-employed or volunteer.

Most doctors work in independent or group practices, and are not employed by the government. Some work in community health centres, hospital-based group practices, primary health care teams or are affiliated with hospital out-patient departments.

Nurses are primarily employed in acute care institutions (hospitals); however, they also provide community health care, including home care and public health services.

Most dentists work in independent practices; in general, their services are not covered under the publicly funded health care system, except where in-hospital dental surgery is required.

What Happens Next (Secondary Services)

A patient may be referred for specialized care at a hospital, at a long-term care facility or in the community. The majority of Canadian hospitals are operated by community boards of trustees, voluntary organizations or regional health authorities established by provincial/territorial governments. Hospitals are generally funded through annual, global budgets that set overall expenditure targets or limits (as opposed to fee-for-service arrangements) negotiated with the provincial and territorial ministries of health, or with a regional health authority or board. Although global funding continues to be the principal approach for hospital reimbursement in Canada, a number of provinces have been experimenting with supplementary funding approaches.

Secondary health care services may also be provided in the home or community and in institutions (mostly long-term and chronic care). Referrals to home, community, or institutional care can be made by doctors, hospitals, community agencies, families and patients themselves. Patient needs are assessed by medical professionals, and services are coordinated to provide continuity of care. Care is provided by a range of formal, informal (often family) and volunteer caregivers.

For the most part, home and continuing care services are not covered by the Canada Health Act; however, all the provinces and territories provide and pay for certain home and continuing care services. Regulation of these programs varies, as does the range of services. The federal department of Veterans Affairs Canada provides home care services to certain veterans when such services are not available through their province or territory. In addition, the federal government provides home care services to First Nations people living on reserves and to Inuit in certain communities.

In general, health care services provided in long-term care facilities are paid for by the provincial and territorial governments, while room and board costs are paid for by the individual. In some cases, payments for room and board are subsidized by the provincial and territorial governments.

Palliative care is delivered in a variety of settings, such as hospitals or long-term care facilities, hospices, in the community and at home. Palliative care focuses on those nearing death and their families and includes medical and emotional support, pain and symptom management, help with community services and programs, and bereavement counselling.

Additional (Supplementary) Services

The provinces and territories provide coverage to certain people (e.g., seniors, children and low-income residents) for health services that are not generally covered under the publicly funded health care system. These supplementary health benefits often include prescription drugs outside hospitals, dental care, vision care, medical equipment and appliances (prostheses, wheelchairs, etc.), and the services of other health professionals such as physiotherapists. The level of coverage varies across the country.

As noted earlier, those who do not qualify for supplementary benefits under government plans pay for these services through out-of-pocket payments or through private health insurance plans. Many Canadians, either through their employers or on their own, are covered by private health insurance and the level of coverage provided varies according to the plan purchased.

Trends/Changes in Health Care

The Canadian health care system has faced challenges in recent years due to a number of factors, including changes in the way services are delivered, fiscal constraints, the aging of the baby boom generation and the high cost of new technology. These factors are expected to continue in the future.

Since publicly funded health care began in Canada, health care services and the way they are delivered have changed--from a reliance on hospitals and doctors to alternative care delivery in clinics, primary health care centres, community health centres and home care; treatment using medical equipment and drugs; and a greater emphasis on public health and health promotion.

Medical advances have led to more procedures being done on an out-patient basis, and to a rise in the number of day surgeries. Over the past several decades, the number of nights Canadians spent in acute-care hospitals on a per capita basis has declined, while post-acute and alternative services provided in the home and community have grown.

Beginning in the mid-1990s, most provinces and territories worked to control costs and improve delivery by decentralizing decision-making on health care delivery to the regional or local board level. Such regional health authorities are managed by appointed members who oversee hospitals, long-term care facilities, home care and public health services in their area. However, in recent years, some provinces have moved away from a decentralized model of health care delivery in favour of consolidating the number of health authorities and centralizing decision-making structures.

Primary Care

The episodic and responsive traditional primary health care model has served Canadians well. However, the aging population, rising rates of chronic disease, and other changing health trends have emphasized the need for the health care system to maintain and continue to develop the capacity to respond to the changing needs of Canadians.

eHealth

Advancing eHealth has been a focus of attention in Canada and several other countries. Electronic health technologies (such as electronic health records and telehealth) are significant drivers of innovation, sustainability and efficiency in the health care system by improving access to services, patient safety, quality of care, and productivity. The implementation and use of electronic health records contributes to primary health care renewal by facilitating the effective coordination and integration of services amongst care providers.

Wait Times Reduction

Provincial and territorial efforts to reduce acute care wait times in accordance with the priorities of their individual systems include: training and hiring more health professionals; clearing backlogs of patients requiring treatment; building capacity for regional centres of excellence; expanding ambulatory and community care programs; and developing and implementing tools to better manage wait times.

Patient Safety

Patient safety, including the avoidance of medical errors or adverse events, is one of the most significant issues facing health systems globally, and is a growing aspect of Canada's efforts to improve the quality of health care provided across the health care system.

The federal, provincial and territorial governments are continuing to work with health care professionals, organizations and institutions to better understand and mitigate the risks involved in the delivery of health care. This includes the development and implementation of a range of measures to improve patient safety and the quality of care.

Timeline

1867

British North American Act passed: federal government responsible for marine hospitals and quarantine; provincial/territorial governments responsible for hospitals, asylums, charities and charitable institutions.

National Health Grants Program, federal; provides grants to provinces and territories to support health-related initiatives, including hospital construction, public health, professional training, provincial surveys and public health research.

Canada Assistance Plan (CAP), federal, introduced; provides cost-sharing for social services, including health care not covered under hospital plans, for those in need, Royal Assent July, effective April 1.

National Forum on Health, federal, created to discuss health care with Canadians and recommend reforms, begins October, reports 1997.

1995

Federal EPF and CAP merged into block funding under the Canada Health and Social Transfer (CHST), to support health care, post-secondary education and social services.

1996

Federal CHST transfers begin April 1.

1998

Health Services Review, New Brunswick, begins, reports February 1999.

1999

Social Union Framework Agreement (SUFA) in force; federal, provincial and territorial governments (except Québec) agree to collective approach to social policy and program development, including health.

Commission on the Future of Health Care in Canada (Romanow Commission), federal, begins April 4, reports November 2002 in report entitled Building on Values: The Future of Health Care in Canada. Canada Health Infoway established.

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